Key Ingredient for a Successful Customer Loyalty Program

Jessica Stillman is a freelance writer based in Cyprus with interests in unconventional career paths, generational differences, and the future of work. She has blogged for CBS MoneyWatch, GigaOM, and Brazen Careerist.

Loyalty programs are designed for the long-term. Whether it's a discount, special offer, preferential service, or the good, old-fashioned café punch card-- whatever you're offering your repeat customers is meant to lure them back to your business weeks down the road.

So you could be forgiven for thinking that this is one area of business, at least, where speed isn't the most fundamental factor. That sounds rational, but it turns out customers are anything but when it comes to loyalty programs, according to a new analysis of 20 brand experiences by digital agency hawkeye.

To get at what really pleases customers, the agency asked 362 consumers to rate the brands for general favorability and purchase intent, discovering that three loyalty programs stuck out as crowd pleasers in the process: McDonald's Happy Meals, Amazon Prime, and My Starbucks Rewards.

What do these three programs have in common? Instant gratification.

"In each case the customer experience is delivered close to the actual purchase. Amazon Prime makes the purchase process easier because the shipping is free once you pay $79 a year fee. Progressive's Snapshot program [which scored near the bottom of the list], by contrast, is not connected to the sale. You plug the device into your car and you can get a discount based on your driving, but it comes much later," explained John Tedstrom, manager of insight and strategy at hawkeye, on Direct Marketing News.

Expecting customers to pay to buy into the program also causes dissatisfaction, Direct Marketing News reports. "Programs that fell in the middle of the pack most likely ended up there because of pricing or lack of wide-ranging appeal," according to the article, which offers two examples: Nike's Plus program which requires purchase of a $149 wristband and the Sony Rewards program which forces consumers to spend a lot to earn rewards.

What's the takeaway for your small business? Your loyalty card allowing your customers to get the fifth latte free may sound perfectly sensible, but this research suggests you'll probably get more bang for your buck by providing something tangible immediately at the time of purchase. So perhaps consider bagging that hypothetical future coffee in favor or a complimentary muffin today.